Buying Property with Bitcoin

November 12, 2017

10 min read

Buying property with Bitcoin is becoming popular all over the world. But what exactly is Bitcoin and how has it become so powerful?

What is Bitcoin?
All you need to know.

Bitcoin is trending, not just for regular financial purposes, but also throughout property markets. Buying property with Bitcoin has become a lot more accepted around the world, changing the possibilities available in real estate markets for buyers and investors.

Bitcoin is a crypto-currency: a digital system of non-physical tokens, which has prescribed value and can be used for trading both goods and services. Bitcoin works much like cash or credit but it is virtual.

Bitcoin was released in 2009 by Satoshi Nakamoto. Jon Matonis, founding director of the Bitcoin Foundation, worked with Satoshi in 2010 where it become more publically accessible. However, it has taken a long time for Bitcoin to become publically aware, which has caused a gap knowledge for many people. Bitcoin today is a popular movement, a new technological concept, and it can be quite tricky to understand the model even after all these years.

The bitcoin exchange rate goes up and down quite frequently, which is all-dependant on supply and demand and its supposed value. In August 2014, 1 bitcoin to usd traded at $400 and now (November 2017) it is trading at $7500. Bitcoin’s value can be broken down into smaller units; the smallest is one hundred millionth of a bitcoin (a Satoshi, which is named after Bitcoin’s founder). The mathematical foundations behind bitcoin specify that there can only ever be 21 million bitcoins, which means no more can be created. However not all 21 million bitcoins have been discovered yet, more and more of them are being exposed daily. Using bitcoin can be done in two ways: 1) to use it through a sort of online wallet or account or 2) through becoming a ‘miner’.

How do you become a miner of Bitcoin?

The records of transactions, known as a ‘ledger’, are monitored publically by a network of computers all over the world. When a transaction is made, the ledger is updated all across the network to keep it up to date. The computers that are operating this solve open source mathematical cryptographic problems to add ‘blocks’ to the network, which is known as the ‘blockchain’. As a response to solving the problems, the computer’s owner then receives bitcoins. The algorithm that is set up alters according to the difficulty to stop bitcoins being released too fast – this process is recognised as ‘mining’. The challenge for those using the system is to solve the algorithm – once this has been done then that person is known as a miner. The network uses timestamps on all transactions and creates a unique maths problem for every transaction made. Every computer in the network must then solve the challenge and refer to the answer for accuracy.

Buying property with Bitcoin

Bitcoin is detached from the government, bank, any company and all individuals. Nobody has control over bitcoin, which is one of the reasons bitcoin and real estate have worked so well together. It is a democratic way of exchanging goods and services. The account can never be frozen or devalued by an official or institution, which are both attractive selling points to many property investors. Another key advantage of bitcoin is that it can be utilised in every country. Due to the technical nature of bitcoin, it may be easy for a lot of buyers, sellers and property investors to avoid taxation and use bitcoin payment for any type of service.

Buying property with Bitcoin is becoming more inclusive, where buyers of property can purchase through bitcoin as can sellers trade their property. It is a paradigm shift, a technological one that has advanced and reshaped real estate financial potential. Real estate deals have become a trend and many property investors all over the world are in favour of this exciting disruption.

The media has seen a lot of investors requesting to use bitcoin as their currency of choice when closing real estate deals. This new phenomenon of cryptocurrency is appearing much more in real estate transactions than ever before. As time changes, so do the way buyers and sellers of property work and collaborate. The buyer of real estate has evolved in a way that involves ambition, gone are the traditional means of buying a property; a variety of payment methods is now desirable. A lot of companies are adopting this new approach to keep up with the changes and demands of buyers, as they want to work with their clients and offer them a bespoke service.

Millennials from all over the world are now choosing a crypto-form of payment. It is evident that this digital currency is receiving rapid recognition as well as appreciating over time. A digital way of buying, selling, trading or earning over the internet, by a click of a finger, is appealing to tech-savvy individuals. Despite companies facing the challenge of understanding bitcoin and integrating this payment method into their business, bitcoin and real estate procedures have become an exciting opportunity, one that is worth figuring out.

Accepting this technological shift and change in demand is essential for the future of real estate while remaining aware of gaps in the knowledge. Due to the currency being largely unregulated, a level of misunderstanding remains and how gains in bitcoin are taxed. For example, for those who hold bitcoin as a capital asset and use bitcoin to buy a property, if the bitcoin appreciates since acquiring it, any of the gain (the built-in gain) would be taxed upon purchase of the property.

Bitcoin Real Estate Sales – Case Studies

1. In 2010, Laszlo Hanyecz was the first person to purchase physical goods through Bitcoin. He paid 10,000 bitcoin for two pizzas, which as a comparison of its value in today’s terms would be equivalent to buying a top-spec mansion in the middle of London, valued around £17 million.
A specific case in London highlights the soaring popularity of Bitcoin. The sellers of 4 Stanley Gardens will only accept bids in bitcoin – not pounds or dollars – and this ethos is quite contagious.

The founding director of Bitcoin Foundation, John Matonis, said: “The double spending problem is when you have digital currencies and the holder of that digital currency can spend it multiple times without the recipient knowing that it had already been previously spent.

“It’s one of the things that prevented digital currency and digital cash from taking off in the 1990s.

“So along comes bitcoin with Nakamoto consensus and in a decentralised way, everyone consolidates a consensus around the blockchain, which is a truth ledger of which bitcoins have been spent and which ones have not been.”

Bitcoin works in a unique way, a way that Laszlo Hanyecz noticed when he made his first physical goods purchase through the digital system many years ago. It is a sort of protocol that is set up to exchange payments across the internet, one that is systematically advanced in such a responsive way to supply and demand, that its effectiveness is being spotted by investors worldwide.

2. This year, Mike Komaransky, an early bitcoin investor and advocate in the new economy decided to put his seven-bedroom, 9,452 square-foot mansion near Coral Gables in Florida up for sale. The asking price is $6.5 million and bitcoin is accepted. The seller reportedly supported every new retailer that accepted bitcoin a few years back to signal a wave of sureness in cryptocurrency. He is that much of a believer in the financial system that he buys and spends a lot of money on physical goods using bitcoin.

But this case is not a fresh one and this isn’t the first time such huge purchases have been made in the real estate industry using bitcoin. In 2016 a man bought a house using bitcoin in Denmark through Coinify for 117 BTC. Earlier this year another man bought a home in California using bitcoin and got a 25% windfall (approximately $1 million) thanks to a flow in the cryptocurrency’s price; bitcoin exchange rate.

A spokesperson in American real estate said: “Miami is not a city; Miami is a country. We have buyers coming in from China and Dubai right now, and with Bitcoin Cash, a buyer could come from anywhere in the world, because it’s cryptocurrency that’s not necessarily tied to where you live.”

3. Michelle Mone, also known as Baroness Bra in the House of Lords, is selling £192 million of Dubai apartments in Bitcoin. Since this news evolved, she has created a spark. Buying property with Bitcoin proved to not only be valuable but also popular. Her new venture represents the first property development ever to be sold using the virtual, digital currency. Michelle and her partner are selling $250m (£192m) of property in Dubai, including two 40-floor towers and a huge shopping mall. As well as that, buyers are able to decorate their new home using Baroness Mone Interiors (her bespoke design service) paid for using cryptocurrency.

A studio apartment in the complex that she is selling starts from around 30 bitcoins ($133,000) rising to 85 bitcoins for a two-bed, making even 1 bitcoin to usd very worthy. They are complemented with such stylish features, many can predict that it will not take long for this legacy to spread even further worldwide.

Doug Barrowman, Michelle Mone’s boyfriend, and businessman, said: “I’ve been invested in cryptocurrency for some time, it’s not a new thing.

“We’re offering the opportunity for people who’ve made significant gains to invest it in land.”

The Knox group, his reputable company, has done a deal with BitStamp to directly convert the bitcoin payment into dollars so it has no exposure to the volatile cryptocurrency. The apartments are valued in dollars and later converted into bitcoin.

Mr. Barrowman adds: “I wanted to offer the property, tech and blockchain community a unique and exclusive opportunity by merging the property and tech sector’s together as a true first for the industry.”

The Collective, a developer that offers small rental apartments in London, said that tenants are able to pay their deposits using bitcoin and by the end of the year, rental payments will also be able to be paid through bitcoin.

The future potential of Bitcoin

Bitcoin has huge potential, especially as it is being exposed to the public much more now through the media. Despite the bitcoin exchange rate fluctuating, the outlook for its value appears strong. People are becoming aware of bitcoin benefits and how it can be employed in a way unique to them, no matter the endeavour. Bitcoin has a capacity to change how the world operates financially, though, there are still challenges with the system. Bitcoin’s anonymity has made people question its authenticity and reliability. These two factors are very important to people when using a platform for financial reasons, which means that the future of bitcoin and its popularity can be questioned. Buying property with bitcoin is now much more possible but reliable advantages are still being interrogated by many.